By Dele Sobowale
"I strongly feel and I have shared with the governors, with Mr. President and Vice-President, who fully support that the Excess Crude Account must be built up to $I0 billion. We should strive to do that in the next few months and we keep that as a buffer" - Minister of Finance, Dr Ngozi Okonjo-Iweala, while briefing newsmen at the Annual Meeting of the World Bank and IMF.
With the ruins of the 2012 budget staring Nigerians and the international community in the face, Dr Ngozi Okonjo-Iweala no longer strikes most Nigerians as the imposing figure she was during her first tour of duty. Coupled with her advocacy for the fraud called "subsidy removal" and the role she played in misleading President Jonathan to announce a fuel price increase on January 1, 2012, she has lost a great deal of credibility which her current call for increasing the Excess Crude Account to $10 billion will not retrieve.
For a start, the Excess Crude Account remains an illegal account which no Minister of Finance in Britain, France, Japan, China or Brazil would have thought of creating – much less increasing. It violates the constitution which she had sworn to uphold. The entire scheme, or more appropriately, scam, is Machiavellian and intellectually and administratively dishonest.
Let me repeat again, there is no legal Excess Crude Account, which Okonjo-Iweala, the President and the Vice-President can agree with the governors to increase. The Minister of Finance, lacking any trump card to play this time around, had simply resorted to wanting to bully the National Assembly, the governors and, by extension, the people of Nigeria, in order to take risks with the Federation Account in the hope that she will at last have a positive result to show for her efforts. That is all.
Since this year's fight over budget, and disagreement is normal in any democracy, will mainly revolve around the benchmark price of crude oil, it is important for Nigerians, particularly the members of the National Assembly, NASS, to understand that the Minister of Finance is not totally honest with Nigerians about her motives for insisting on $75 per barrel as the benchmark.
And she is not alone. The Governor of the Central Bank of Nigeria, CBN, Mallam Sanusi Lamido Sanusi, last week, while supporting the $75/barrel benchmark, was reported to have said that "There was a time when the price of crude oil went down from $140 to under $40".
It was a false statement – and that is being polite. There was never a time when the price of crude went down so far and so suddenly in any one calendar year. The mere fact that top government officials have to dissemble in order to win the argument constitutes the cardinal reason for caution.
(http://vml1.s3.amazonaws.com/wp-content/uploads/2012/09/Jonathan-Okonjo-Iweala.jpg?9d7bd4) (http://www.vanguardngr.com/2012/09/stop-chasing-shadows-mark-tells-jonathan-okonjo-iweala/jonathan-okonjo-iweala/)Jonathan and Okonjo-Iweala On her part, the Minister of Finance had argued that benchmark prices are not fixed arbitrarily. Nobody can disagree with that. But, when she went further by implying that there is a "scientific" way of determining the exact amount, she was being clever by half. Let me explain why.
Since the first Arab oil embargo, following the Yom Kippur War, which began on October 6, 1973, and which was again won by Israel , driving the price of crude from $3/barrel to $12 per barrel within weeks, every nation on earth had always attempted to guess what the average price of crude will be during the coming financial year as they prepared their budgets.
Similarly, multinationals (e.g airlines) have also started their annual budgets by assuming a benchmark figure for crude oil. Polaroid Corporation, for which I worked as financial analyst in an office close to the Finance Minister's MIT, in Cambridge, Massachusetts, USA, was one of them. As it turned out, there was another Nigerian, an Old Igbobian, working with Pratt Whitney, an aircraft engine manufacturer, whose company also annually tried to guess what crude prices would be for the next year.
We met often for drinks and we discussed various issues – among which was movement of crude prices. There was no single occasion when Polaroid and Pratt Whitney adopted the same benchmark. The point being made here is that Okonjo-Iweala should not arrogate to herself a monopoly of how benchmark prices are determined. Neither should she expect us to accept that there is a universally accepted benchmark.
There is no universally accepted benchmark – it all depends on the basic assumptions that were used to derive them. Nations which import I00 percent of their crude oil cannot adopt $75 as their benchmark when the Brent Crude is now priced at $120/barrel. A judgment call by the Minister should not be elevated to the status of the Ten Commandments handed down by God.
Obviously, by first of all selecting a target Excess Crude Account balance she wants to achieve; Okonjo-Iweala had done an intellectually questionable thing – she had provided the answer. It is only by getting the NASS to accept $75 can she hope to achieve, at least, $10 billion balance in this dubious account called Excess Crude Oil Account. In fact, having gone out of her way to manipulate the figures this way, one is tempted to believe that she actually intends to have over $10 billion in that account in order to convince the President that she is really "performing".
Nothing supports this suspicion more than her statement to the reporters – most of whom might not be well-advanced in economics and finance. According to her, "I have discussed with the Governors that we need to build up our reserve to $50 billion (N8 trillion) or 61% of this year's budget".
Obviously, Okonjo-Iweala had deceived the governors, if indeed she got their agreement, to accept that 61% of next year's budget, which is her true intention, should be left with the Federal Government, or more to the point, with her, at a time when the finances of every state will be stretched beyond limit. Again, let me explain why.
In addition to dissembling about the real motives behind wanting $75/barrel benchmark, the Minister had also thrown in some scare tactics. She claimed that inflation will accelerate, jobs will be lost and infrastructure will suffer setback. That is a lot of drivel. Higher inflation will be experienced even if she is allowed to have her way.
Food prices, which constitute a major component of inflation measurement, will escalate next year; so will rent on account of buildings washed away or rendered uninhabitable by flood. Removal of allocation for "subsidy" means that fuel prices will climb again. All things considered, inflation will be in the order of 25% next year – regardless of which benchmark is adopted.
It serves no useful purpose for the Minister to try to bully or deceive us to accept what logic rejects. You can't bully reality. Incidentally, that was a statement I made to Professor Ojowu, a former Chief Economic Adviser to President Obasanjo, after he presented a laughable proposal in 2004. He lost his job shortly after.
Granted, the budget for next year was prepared, largely, before the scale and scope of the national flood disaster became known. Even if one accepts the Minister's proposals on her own terms, namely, the need to save funds for the rainy day, it is difficult to imagine what future rainy day could be more devastating than the one we currently experience.
At least 20 states are in dire need of funds – over and above their budgets for 2013; the rest, as well as the Federal Capital Territory, have also suffered collateral damage as a result of the calamities suffered by the 20. Their needs are immediate – like yesterday, in fact. Of what use is salting away $50 billion for the future when the people for whom it is meant are dying now.
It is all well and good to talk about the long run; but if a balance is not struck between the present and the future, a lot of people might be dead before the long-run arrives. What has happened with flooding this year is a novel experience, not only in Nigeria, for which the standard World Bank approach to solving problems might be counter-productive; if not down-right dangerous.
The Minister of Finance and the CBN Governor simply have to be told that they cannot keep $50 billion (which I still believe is their real target) locked up, instead of having a significant percentage released to the states to meet the current challenges which flood had thrown on their laps. In fact, if there was an agreement with the Minister, the governors, after declaring force major, should break it.
They have two other reasons for disclaiming the agreement. First it is illegal to continue to operate the Excess Crude Account. Second, they have been tricked into signing an agreement based on partial disclosure. The Finance Minister and the CBN Governor want to pack away $50 billion; not $I0 billion. To continue with the "agreement" will amount to a criminal neglect of their people.
Finally, the Senate has already offered a compromise; the senators are proposing $78/barrel. To me, that is still giving the Executive branch more money than is necessary to keep and deploy – not necessarily in the public interest. After all, the most corrupt unit in the Federal Republic of Nigeria is still the Federal Government. Why give them more money to mismanage?
Vanguard Nigeria
They just need to amend it thoroughly